The Federal Government’s acceptance of most Financial System Inquiry recommendations could deliver the insurance industry’s biggest shake-up in many years but brokers may have a long wait to see how the changes will be implemented.
The Government made its much-delayed response the FSI report yesterday, pledging to accept almost all the recommendations made by the David Murray-led inquiry.
However, the Government has also pledged to consult extensively on the implementation of many of the reforms.
NIBA CEO Dallas Booth says the devil will most certainly be in the detail, particularly around one of the key recommendations.
“The Government will implement recommendations which will require product manufacturers (insurers) and distributors (brokers and others) to take responsibility for the design of those products, and the impact the products will have on the target consumers,” he says.
“The Government has committed to undertake detailed consultation on the development of these new legal principles.”
As part of the foreshadowed changes, “financial advisers” will also be required to hold a degree, pass an exam, undertake continuous professional development, subscribe to a code of ethics, and undertake a professional year before they can advise clients.
However, exactly who constitutes a “financial adviser” remains unclear.
“NIBA is taking steps to clarify whether these requirements will apply to general insurance brokers,” Booth says.
Booth says regardless of the final shape of the reforms, anyone giving advice on life insurance, savings and investment products will need to take steps to meet the new requirements for minimum levels of professional education, CPD and professional conduct.
To read more of Booth’s analysis of the Government’s response, click here.
Insurance Council of Australia CEO Rob Whelan says that the Federal Government response to the Financial System Inquiry accepts that the overall regulatory settings for general insurance are satisfactory and require little intervention, particularly in regard to insurance.
“The Government’s response supports industry-led initiatives,” Whelan says.
“It recognises the work the ICA and its member companies are undertaking to explore potential improvements to disclosure that could help consumers make better informed decisions about their insurance.”
“In July the ICA established its Effective Disclosure Taskforce, which is examining the role of disclosure documents in the context of the broader consumer experience. This includes guidance, sum insured calculators and advice provided by insurers when consumers are purchasing products.
“It’s timely that the Taskforce, chaired by leading insurance lawyer Michael Gill, will soon advise the ICA Board on initiatives that increase the effectiveness of insurance disclosure documents.”
To view the Government’s full response, click here.